Crossing the line – anti-competitive information sharing by Jocelyn Katz, Marlon Dasarath
and Derushka Chetty
1.
2.
Introduction
1.1.
Pro-competitive, efficiency enhancing information sharing leads to innovation and
growth. Several benefits can be derived from trade associations whose objectives
are increased standardisation and transparency. There are, however, inherent
dangers in information sharing between competitors in the form of tacit coordinated
conduct or, in fact, naked collusion. In this paper we weigh the benefits of procompetitive, efficiency enhancing sharing of information between competitors
against the anti-competitive effects thereof and draw the line for companies between
competitively neutral or pro-competitive and anti-competitive information sharing.
1.2.
We set out the benefits of information sharing of the type found in trade associations
and the like and show how it can and does build dynamic, innovative industries.
1.3.
However, even pro-competitive or efficiency enhancing information sharing may
lead to anti-competitive effects. Setting aside calculated collusion or naked cartel
activity, we explore the internal and external risk factors that may lead to anticompetitive outcomes. We premise that the risk associated with information sharing
depends on, inter alia, the type of information that is shared, the way that the
information is shared, the structure of the market in which the information-sharing
participants are active and the competitive dynamics or the way in which companies
compete with each other in the affected industry.
1.4.
We will then go on to examine how trade associations and other information sharing
would be affected by the complex monopoly provisions proposed by the Competition
Amendment Bill.
Overview of the South African Competition Act No. 89 of 1998 (the “Competition
Act”)
2.1.
The South African Competition Act aims to regulate the behaviour of market
participants and to prevent certain anti-competitive structures in order to achieve a
more effective and efficient economy such that consumers can freely select the
quality and variety of goods that they desire.
2.2.
Information sharing arrangements would fall to be analysed in terms of section 4 of
the Competition Act, i.e. the section that deals with restrictive horizontal practices
between competitors. Section 4 is comprised of two parts.
2.3.
Section 4(1)(a) of the Competition Act provides that, should an agreement between
parties in a horizontal relationship have the effect of substantially preventing or
lessening competition in a market, such agreement will be prohibited unless a party
to the agreement can prove that any technological, efficiency or other procompetitive gains resulting from that agreement outweighs that effect (i.e. the rule of
reason test). The burden of proof in this regard rests on the party engaging in the
activities that are the subject of the allegations.
2.4.
Section 4(1)(b) of the Competition Act, on the other hand, sets out what are referred
to as “per se” prohibitions. The prohibitions falling within section 4(1)(b) of the
Competition Act are automatically and absolutely prohibited and cannot be justified
on the basis of the rule of reason test. The only enquiry in such circumstances is
whether or not, as a matter of fact, the conduct complained of is correctly
categorised as being automatically prohibited.
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3.
2
2.5.
While a full discussion of the requirements for a contravention of section 4 of the
Competition Act is beyond the scope of this paper, it is important to note that the
mere exchange of information between competitors is not automatically prohibited
unless it has the effect of price fixing, market allocation or collusive tendering in
contravention of section 4(1)(b).
2.6.
Accordingly, the focus of the present paper pertains to the exchange of information
between competitors resulting in anti-competitive conduct or tacit collusion of the
kind which falls short of the automatic prohibitions referred to above and which is
analysed in terms of the rule of reason test contained in section 4(1)(a) of the
Competition Act.
Definition of Information Sharing
3.1.
The sharing of commercial information of a sensitive nature between competitors
has recently attracted a mass of attention from the competition authorities both
abroad and in South Africa. The notion of perfect competition in a market place is
premised on participants in that market having access to perfect information and as
such, information exchanges are considered to be of paramount importance in order
for competitors to actively participate in a competitive market place.1
3.2.
Notwithstanding the foregoing, increased access to information results in increased
transparency in respect of the conditions of the market and the conduct of the
participants therein. Accordingly, access to certain kinds of information may serve
to distort market conditions and hinder competition in the market rather than
promote it. The exchange of information between competitors may therefore result
in tacit collusion.
3.3.
Tacit collusion does not involve any explicit communication between firms, but the
market outcome (in terms of prices set or quantities produced for example) may still
resemble that of a cartel with firms collectively earning supra-normal profits. With
regard to tacit collusion, firms agree to play a certain strategy ‘without explicitly
saying so’ by monitoring each others prices through their own market share, for
example, and keeping theirs the same.2
3.4.
An oligopolistic market bears the highest risk for collusion, as it is a market structure
that is characterized by a small number of sellers. Due to the lower number of
competitors in the market, there is a high level of interaction between the
incumbents, such that each oligopolist is fully aware of the actions of its competitors.
More importantly, the decisions of one firm in the market influences, and is
influenced by, the decisions of other firms in the market. In addition, each firm’s
profits depends on the actions taken by all the other firms in the market. For
example, if one oligopolist raises its output,3 the market price faced by all firms in
that market falls, thereby affecting the profits of all firms. As such, strategic planning
by an oligopolist always involves taking into account the likely responses of its
1 Mats Johnsson and Johan Carle ‘Benchmarking and E.C. Competition Law’ E.C.L.R. 1998, 19(2), 74
2 Marc Ivaldi, Patrick Rey, Paul Seabright and Jean Tirole ‘The Economics of Tacit Collusion’ March 2003
3 Since an oligopolistic market is made up of a very few number of suppliers, each oligopolist is able to exert some
market power and influence market prices.
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competitors. It will also always consider how its actions affect its rivals and how its
rivals’ actions will affect it.4
3.5.
4.
For purposes of the present paper, we will focus our analysis on the sharing of any
or all types of information between parties in the same line of business, i.e. actual or
potential competitors in a horizontal relationship.
Vehicles For the Transmission of Information Between Competitors
Competitors often find themselves in situations, relationships or engagements with other
competitors in the same line of business, the circumstances of which either have the aim of,
or are conducive to, the sharing of particular types of information between them. We set
out below a brief overview of some of the vehicles that are used to facilitate the transfer or
exchange of information by and between competitors.
4.1.
Industry Bodies, Regulatory Bodies and Trade Associations
4.1.1.
It is common practice for industries to be regulated by a regulatory body
and to have a common industry body and/or trade association
representing and promoting the common interests of the members
thereof. The various members of such associations are usually
competitors in the same industry and often attend various meetings held
by the regulatory body, industry body or trade association concerned.
4.1.2.
The aforementioned bodies and associations often serve to facilitate
information exchanges between competitors. They are useful in that
they often gather and disseminate information pertaining to investments,
employment figures, wages and product standards in order to improve
communication between competitors, customers and regulators.5
4.1.3.
The information disseminated at such meetings may often have procompetitive benefits. In the South African mining industry, for example,
general safety information is often imparted in trade association
meetings, where due to the dangers and hazards associated with
mining, competitors get together to exchange personal experiences in
order to improve the general safety of the mining industry as a whole. In
addition, competitors in the mining industry often come together through
the various trade association and industry body fora in order to fund and
undertake various research projects aimed at building a safer industry.
4.1.4.
While it is acknowledged that such bodies perform useful functions such
as education, technological advancement and regulation, at the same
time, such fora may also be used by competitors as a platform for
collusion whereby competitors come together in order to discuss and
exchange information pertaining to their individual strategies, market
shares, customers and sales and forecast information.
4 Jefffrey M. Perloff Microeconomics 2 ed International Edition (2001) 416
5 Rainer Nitsche and Nils von Hinten-Reed ‘Competitive Impacts of Information Exchange’ (2004) CRA 21
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4.2.
4.3.
4
Joint Ventures
4.2.1.
Joint ventures refer to agreements between firms “that include some coordination of research, production, promotion or distribution”6. A joint
venture between competitors may often result in cheaper products of a
better quality as a result of economies of scale, the combining of various
capabilities and reduced information and transaction costs7.
4.2.2.
While joint ventures may assist firms to be more efficient through cooperation of various aspects of the joint business, such entities may also
have the effect of reducing competition through the exchange of
information. Accordingly, it is imperative that proper mechanisms be put
in place in order to ensure that sensitive information, of the types
discussed below, is not disseminated through the joint venture8.
4.2.3.
In the context of South African competition law, the Competition Tribunal
(the “Tribunal”) has grappled with information sharing between the
parties to a joint venture in the Anglo/Kumba case9. In particular, the
Competition Tribunal stated that, as the parties to the merger are
competitors, any potential cartel may be disguised by the joint venture
and that the joint venture may also serve as a vehicle to “cross pollinate”
information from one competitor to another.
Benchmarking Studies
4.3.1.
Benchmarking refers to a methodology of an organisational nature that
is focused on measuring prevailing practices and contrasting same with
other competitors10. A fundamental feature of a benchmarking exercise
is the exchange of information that takes place between other
benchmarking partners through a multitude of means, including, inter
alia, agreements of a contractual nature, informal agreements or through
efforts of a collaborative nature. Benchmarking clubs and trade
6 Herbert Hovenkamp Federal Antitrust Policy (1999) 197
7 Federal Trade Commission and Department of Justice Antitrust Guidelines for Collaboration Among Competitors (April
2000) 6
8 Federal Trade Commission and Department of Justice Antitrust Guidelines for Collaboration Among Competitors (April
2000) 21
9 The large merger between Anglo American Holdings Limited and Kumba Resources Limited (with the Industrial
Development Corporation intervening) (Case No.46/LM/Jun02). In addition, the Competition Tribunal stated the following
with respect to information sharing – “… the merger might offer an opportunity for Iscor’s managers and Anglo’s steel
managers, if they were placed into Kumba, to legitimately meet to discuss production issues and thus if a cartel does
exist, to disguise its meetings through a legitimised forum. It might also offer the opportunity for Anglo’s steel and iron ore
directors to cross-pollinate information learned on one board to the other. At our request Anglo proposed a condition to
address our concerns on information sharing to facilitate collusion. By including this condition we endeavour to set up a
Chinese wall between directors of Highveld and Scaw in the downstream steel market and directors of Kumba in the
upstream iron-ore market, to prevent the flow of information between competitors of Iscor.” (our emphasis added).
10 In particular, the practice of benchmarking consists of the collection of data by one competitor of another/others
relating to various factors including, inter alia, costs, performance and an array of various efficiency related factors. The
aforementioned data is then collated and used as a comparison to gauge an undertaking’s performance in the market
place. Op cit note 1
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associations are the usual mediums through which such benchmarking
exercises are conducted.11
4.4.
4.3.2.
In the South African telecoms industry, the Namibian Interconnection
Benchmarking Study has recently been submitted to the Department of
Communications, the Parliamentary Portfolio Committee on
Communications, ICASA and the Competition Commission in order to
illustrate the way in which suppliers are incentivised to lower costs, pass
such reductions on to consumers and expand on the innovation of new
products and services in the telecoms industry.12
4.3.3.
In addition, we understand that certain benchmarking studies have been
conducted in South Africa in relation to the management systems for
water laboratories. The information contained in such benchmarking
studies is considered to be useful in the evaluation of effective
information management and to assist laboratories to remain profitable
and competitive in a fast growing industry.13
4.3.4.
Notwithstanding the benefits to be gained from benchmarking studies, it
is plausible that information sharing between competitors as part of a
benchmarking study can result in conduct in contravention of
competition law. This is especially so in the case of information sharing
pertaining to business secrets and pricing information. The practice of
benchmarking can also lead to anti-competitive conduct by way of
concerted practices as the more detailed information that a competitor
has about its rivals, especially if such competitors compete in an
oligopolistic market for homogenous products, the easier it would be to
act in a concerted manner, due to the common information utilised by
the parties. Thus, where information is exchanged in the context of a
benchmarking practice, there is a greater potential for anti-competitive
conduct.14
Tenders
4.4.1.
Various industries in South Africa operate by way of a tender process. A
tender refers broadly to procedures or competitive bids made by
competitors to state enterprises, organs of state and private entities in
respect of the procurement of goods or services.15
4.4.2.
In industries characterised by highly concentrated markets, it is not
uncommon for the same contenders to tender against each other for
certain contracts time and time again. Accordingly, the tender arena
may constitute a platform for collusion and may contribute to the
fostering of cosy relationships between competitors. It is important that
11 Tony Bendell and Louise Boulter ‘Competition Risks in Benchmarking’ E.C.L.R. 1999, 20(8), 434-435
12 See ‘How to Reduce Telecoms Costs’ available at http://mybroadband.co.za/news/Telecoms/8910.html
13 G J Broodryk and W H J De Beer ‘A Benchmarking Study on Information Management Systems for Water
Laboratories in South Africa’ WASADV 2003, 29(1), 39-42
14 Op cit note 11 at 438
15 Phillip Sutherland and Katharine Kemp Competition Law of South Africa Service Issue 10 (2008) 5-59
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the representatives of the competitors in the tender arena do not use
any opportunities to engage in collusive tendering in order to exchange
information pertaining to the contents of their individual tenders or to
engage in even more risky behaviour by deciding which firm will submit
the highest and lowest bids16.
4.5.
Single Engagements with Competitors, Suppliers and Customers
It is possible that, in some instances, competitors in a horizontal relationship can
also be customers and/or suppliers in a vertical relationship.
Accordingly,
interactions between parties in the aforementioned relationships as well as any
interactions between competitors may serve as a platform for the exchange of
information which could be used by parties in the competitive plane.
4.6.
5.
In practice therefore, information may be exchanged between competitors in a
variety of different ways. Parties may agree to exchange information with one
another in the context of a benchmarking study, joint venture, single engagement or
alternatively through the medium of a trade association. In principle, however, the
method chosen to exchange information ought not to colour its analysis for the
purpose of competition law. In each case, the important question is whether the
agreement might impair competition or enhance efficiency and the form that the
practice takes does not determine this issue17.
Benefits of Legitimate Information Sharing
To the extent that information sharing between competitors does not fall foul of the
Competition Act, it is arguable that such exchanges will, in most instances, result in procompetitive benefits. We set out below a brief summary of the various ways in which
information sharing between competitors could, depending on factual circumstances in
each case18, lead to pro-competitive benefits.
5.1.
Discovery Mechanism in a Market
5.1.1.
It has been acknowledged that industries without information relating to
market conditions would result in participants in those markets
constantly adapting to changing conditions by a trial and error process.
The Commissioner of the US Federal Trade Commission stated that
information exchanges could assist firms in making informed decisions
regarding their products and services thus eliminating the need for a
costly trial and error process.19
16 Collusive tendering occurs when undertakings share information in order to collaborate on responses to invitations to
tender for the supply of goods and services. Instead of competing to submit the lowest possible tender at the tightest
possible margins, the parties may agree on the lowest offer to be submitted or agree amongst themselves who should be
the most successful bidder.
17 Richard Whish Competition Law 4 ed (2001) 442 - 443
18 This includes the type of information shared as well as the structure and competitive dynamics in the market in which
the exchange occurs.
19 Op cit note 5 at 11
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5.1.2.
5.2.
5.3.
5.4.
7
Accordingly, it has been acknowledged that the exchange of information
may serve to allow meaningful comparisons between competitors and
could assist in encouraging new entry into the affected markets.20
Investment Decisions and Organisational Learning
5.2.1.
While there has been little empirical investigation on the pro-competitive
benefits of information sharing as a result of the co-ordination of
investment decisions, it has been acknowledged that information sharing
between competitors can lead to beneficial effects by improving the
distribution system and marketing strategy of firms. In addition,
information exchanges relating to research plans and technological
developments may lead to beneficial solutions in the area of research
and development.21
5.2.2.
This is clearly evidenced in the mining industry in South Africa where, as
stated above, competitors frequently get together in the context of trade
association and industry body meetings to exchange best practice
information pertaining to research in order to improve the safety of the
industry.
5.2.3.
Thus, it has been acknowledged that the revelation of information
regarding capacity shortages can serve to guide and assist competitors
in making informed decisions about future investment.
If such
information is not revealed, private research would need to be
conducted by the potential investors in order to ascertain the appropriate
domain in which to allocate resources.22
Product Positioning
5.3.1.
It has been stated that, without co-ordination between competitors, firms
may position their products in a manner that hinders both their joint
profits and consumer welfare. In certain instances, communication
between competitors may lead to outcomes that serve joint profit
maximisation and may in turn serve to have a positive effect on
consumer surplus and welfare.
5.3.2.
It is important to note that the benefits to be derived in this regard stem
from the co-ordination of product positioning and not co-operation in
price setting.23
Selecting the most efficient firms
An exchange of information between competitors may have the result that firms with
higher costs reduce output while firms with lower costs expand output. Accordingly,
this may give rise to inefficient firms exiting the market in order to make room for
20 Loc cit
21 Op cit note 5 at 11
22 Op cit note 5 at 17
23 Op cit note 5 at 16
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more efficient firms to enter. In this way, information exchanges may serve to
improve efficiency and maximise consumer welfare.24
5.5.
Exchange of Tender Information
It has been said that if contenders for a specific tender can learn from the
information advanced by the other bidders, such information exchange may serve to
improve the value of that which is the subject of the tender. The revelation of
auction information can therefore, in certain instances, serve to assist bidders to bid
more aggressively without the risk of over-bidding. In circumstances where auction
information is revealed, such information would need to be aggregated or the
identities of the bidders concealed so as not to assist firms in assessing the
sensitive business commercial strategies of rivals in the market.25
5.6.
It is clear from the above that the dissemination and exchange of information
between competitors and the creation of a transparent market may be harmless or
even highly beneficial to the competitive structure of the market. Trade associations
frequently collect industry data on prices, outputs, capacity, and investment and
circulate information to their members. Detailed market data may make it easier for
undertakings to plan their own business strategies (for example, data may avoid the
creation of over-capacity in an industry based on false expectations). Further, as
stated above, the theory of perfect competition rests upon the assumption that there
is perfect freedom of information. A market characterized by many buyers and
sellers should, therefore, positively benefit from such transparency. Where
information is available generally, consumers with complete knowledge of what is on
offer may fully utilize their choice and competition will be maximized. Therefore,
where the exchange of opinion or experience is harmless or beneficial to
competition, it will not infringe competition law26.
5.7.
In addition, Sutherland and Kemp27 have stated the following in relation to the procompetitive effects of information exchanges:
“…information about the creditworthiness or history of customers can be
exchanged for the benefit of all firms and can reduce transaction costs
significantly. Competition authorities accordingly should view exchanges of such
information more favourably.”
5.8.
Sutherland and Kemp’s observations have been evidenced in the European case of
ASNEF-EQUIFAX28, where the European Court of Justice (the “ECJ”) provided
24 Op cit note 5 at 11
25 Op cit note 5 at 18
26 Alison Jones and Brenda Sufrin EC Competition Law : Text, Cases and Materials 3ed (2008) 671
27 Op cit note 15 at 5-571
28 ASNEF-EQUIFAX Servicios de Informacion sobre Solvencia y Credito SL (“AE”) v Asociacon de Usuarios de
Servicios Bancarios (“Ausbanc”) (C-238/05) [2006] E.C.R I-11125 (ECJ (3rd Chamber)). Ausbanc, an association
representing bank users, alleged that the activities of AE, a credit reference agency, involved the exchange of credit
information between various financial institutions and that such exchanges were in violation of Spanish and EC
competition law. The ECJ stated that the “exchange of information of the type in issue is, in principle permissible,
provided that: the relevant markets are not highly concentrated; the system in question does not permit lenders to be
identified; and the conditions of access to the system are not discriminatory”. The ECJ, however, sounded a note of
caution stating that in those markets which are highly concentrated, particular types of information exchanges may have
the effect of increasing collusion between competitors in that such exchanges may enable competitors to become aware
of the commercial strategy and market information of their rivals.
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clarity with regard to the exchange of information between financial institutions in
relation to the creditworthiness and solvency of their respective clients without
beaching anti-trust legislation. The ECJ stated that “information exchanges of the
type in question made it easier for lenders to foresee the likelihood of repayment
and were therefore capable, in principle, of reducing the rate of borrower default and
thus of improving the functioning of the supply of credit. This meant that lending
decisions could be made more effectively and made it easier for new competitors to
enter the market. Customers also stood to gain, since a reduced risk of defaults
would be likely to be reflected in cheaper loans”. Thus the ECJ held that in order to
avoid the risk of anti-competitive behaviour, it was critical that the identity of the
various lenders were not revealed and that all financial institutions would need to
have access to the credit referencing system on the same terms and conditions.
Thus, while the exchange of sensitive commercial information between rivals may
potentially be problematic in terms of competition law principles, the ECJ’s judgment
reveals that it is possible for such exchanges to have a legitimate purpose and may
even have a pro-competitive effect on competition in the relevant market.29
5.9.
6.
In the South African credit information industry, credit bureaus often facilitate the
voluntary exchange of information between credit grantors or lenders. Such
information exchanges serve to allow the lenders to supplement their own
information so that credit decisions are based on the best, most recent and up to
date information. Such information exchanges assist a lender to quantify the risk
and to differentiate between good and bad borrowers.30
Anti-competitive effects of Information Sharing
6.1.
The difficulty in analysing information sharing agreements from a competition law
perspective, both local and foreign, is to distinguish between legitimate and anticompetitive exchanges. Given the relative infancy of competition law in South
Africa, a constant challenge facing practitioners and regulators alike is that the
rapidly changing and increasingly sophisticated face of commercial activity must be
assessed against the fairly rigid, mechanistic and formulaic backdrop of the
Competition Act.
The issue of the so-called information sharing between
competitors is illustrative of this difficulty.
6.2.
This difficulty is further exacerbated by the absence of local precedent which settles
the position as to where the South African competition authorities stand on this
point. Accordingly, as regard is often had to foreign jurisprudence in those
instances where there is a paucity of precedent in our local jurisprudence, it is
submitted that an analysis of the concept of information sharing in foreign
jurisprudence is likely to shed light on the way in which in the South African
competition authorities will approach the matter.
6.3.
Two issues, in particular, are considered to be crucial to the making of a
determination between legitimate and anti-competitive exchanges the effect of which
is tacit collusion. The first is the type of information that is shared and the second is
the structure of the market in which such information exchanges occur.31
29 Fred Houwen ‘European Court of Justice Clarifies Circumstances in Which Financial Institutions May Exchange Credit
Information Without Breaching Competition Law’ J.F.R. & C. 2008, 16(1), 108-110
30 Ashina Singh ‘Credit Information Industry Code of Conduct 2006’ (2006) 12 - 13
31 Op cit note 26 at 672
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Type of Information Shared
6.4.
In relation to the type or characteristics of information exchanges, the following
factors have been enunciated by foreign jurisprudence as influencing whether an
information exchange is likely to be either pro-competitive or anti-competitive:
6.4.1.
The subject matter of the information exchange
6.4.1.1.
6.4.1.2.
Pricing Information
6.4.1.1.1.
Competition law regulators are often very
suspicious when information is exchanged
between competitors regarding capacities,
costs, demand, prices32 and sales as such
information is considered to be critical for
competitors to keep an eye on any digression
from an arrangement of a collusive nature.
6.4.1.1.2.
Such information exchanges are therefore
considered to assist in the administration and
enforcement
of
collusion
between
competitors33. By way of example, the sharing
of pricing information between competitors
may assist in the various firms drawing
inferences regarding costs of their rivals and
this may serve to assist in predicting future
demand.34
Bidding / Tender Information
To the extent that revealing information constitutes collusive
tendering or reveals the commercial strategy particular to a
rival, such exchange may serve to erode the vigour with
which competitors compete35.
6.4.1.3.
Investment Information
32 The European Commission has prohibited various information arrangements relating to price. In the case of IFTRA
Glass Containers, the European Commission held that an agreement relating to the essential elements of price policy,
including terms of trade, price lists, discounts, rates and date of any alteration to them was contrary to the provisions of
Article 81(1) [1974] O.J. L160/1, [1975] 2 C.M.L.R. D20.
33 In addition, in the cases of Coblea/VNP [1977] O.J. L242/10, [1977] 2 C.M.L.R. D28., Hasselblad [1982] O.J. L161/18,
[1982] 1 C.M.L.R. 297., Dutch Sporting Cartiridges,3rd Report on Competition Policy (1973). the exchange of price
information, including prices, rebates, price increases, reductions, discounts and general terms of sale, supply and
payment between competitors was held to be prohibited. See note 3 at 435. In the cases of Peroxygen Products [1985]
O.J. L35/1, [1985] 1 C.M.L.R. 481., Flat Glass Sector in the Benelux [1984] O.J. L212/13, {19850 2 C.M.L.R., and Italian
Cast Glass [1980] O.J. L383/19, [1982] 2 C.M.L.R., the exchange of information pertaining to production and sales
figures were held to be anti-competitive.
34 Op cit note 5 at 8
35 In the case of Building and Construction in the Netherlands [1992] O.J. L220/27, [1985] C.M.L.R. 108, the exchange
of information between competitors concerning a bidding procedure was prohibited and was considered to be contrary to
anti-competitive principles.
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While it has been shown that the exchange of investment
information between competitors can lead to pro-competitive
effects, such exchanges, to the extent that they serve align
conduct and diminish the nature of competition in the market
concerned, are likely to be considered anti-competitive36.
6.4.1.4.
Customer Information
The exchange of customer information may lead to decisive
shifts in a firm’s pricing policies and can also serve to erode
the vigour with which firms compete in a market37.
6.4.1.5.
General Business Information
6.4.1.5.1.
In the case of Non-ferrous semi conductor
manufacturers38, an agreement provided for
the “regular exchange of general business
information,
which
included
research,
development, production, sales promotion, raw
materials supplies, commercial management
and data processing and general business
strategy”. The European Commission stated
that as such companies constituted an
oligopoly, the exchange of such information
may have led the parties to act in concert and
therefore in a manner contrary to competition
law legislation.
6.4.1.5.2.
Information exchanges in this context may
therefore have the effect, depending on the
frequency with which such information is
exchanged, that competitors are able to detect
changes in a market and adapt their behaviour
quickly in response thereto.
This makes
effective competition between rivals in a
market difficult to achieve and such information
sharing may act as a barrier to enter into the
market as existing competitors in a market will
immediately react to any potential new
entrants.39
36 In the case of Zinc Producer Group [1984] O.J. L220/27, [1985] C.M.L.R. 108, the exchange of information between
competitors concerning proposed investments was prohibited.
37 The European Commission has stated in Seventh Report on Competition Policy that “regular communication of
invoices would certainly be suggestive of a prohibited agreement”. In addition, in the case of OFITOMEP International
Association of Paper Machine Wire Manufacturers 6th Report on Competition Policy, para 135., the exchange of
information concerning names of customers together with particular product information were held to be anti-competitive
by the European Commission.
38 5th Report on Competition Policy (1975)
39 Op cit note 1 at 109 - 110
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6.4.2.
6.4.3.
Specificity
6.4.2.1.
An important factor which is determinative in ascertaining the
permissibility of an information exchange from a competition
law perspective is the specificity of the information. Basically,
information exchanges containing information specific to a
particular competitor are considered to be more prone to
competition law scrutiny40 than exchanges concerning
information pertaining to the industry as a whole.41
6.4.2.2.
Thus, it will often be easier to identify information that is
particular to a rival where such information is of a
disaggregated nature or can easily be disaggregated. This
has the effect of making the relevant market more transparent
by diminishing the uncertainty that competitors usually
possess in a market.42
6.4.2.3.
Accordingly, access to specific information of a rival may
serve to shed light on the strategic commercial objectives of
the competitor concerned.
Accordingly, the level of
aggregation of the information subject to an information
exchange is considered to be crucial in influencing the effect
of such exchange.43
The Time Period to which the Information Relates
6.4.3.1.
In order for competitors to effectively collude, any information
exchanges would need to relate to current and future
information in order to ensure maximum co-ordination
between competitors.44
6.4.3.2.
The European Commission has stated that it does not object
to the exchange of historic information between competitors
as such information would be less likely to impact current and
future market behaviour of competitors45.
6.4.3.3.
The European Commission has however, distinguished
between historic information, current information and future
forecast information. In terms of historic information, it may
40 The European Commission has stated in the Seventh Report on Competition Policy that “the provision of collated
statistical material is not in itself objectionable from the point of view of competition policy”. There is however, a risk
where information exchanges between competitors would enable the competitors to identify information particular to
rival’s performance on the market. In the case of White Lead [1979] O.J. L21/16 para 25., it was stated that “The
information provided on deliveries is very precise. It makes it possible to recognise another party’s intentions in good
time”.
41 Op cit note 5 at 8
42 Op cit note 1 at 77
43 Op cit note 5 at 8
44 Op cit note 5 at 8
45 Tractor Exchange U.K. Agricultural Tractor Registration Exchange para 61 [1992] O.J. L68/19, [1993] 4 C.M.L.R. 358.
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be acceptable for such information to be more detailed than
current information as such information is less likely to have
an affect on the conduct of participants in the relevant market.
The age of information required to constitute historic
information is a question of fact which depends on the factual
circumstances of each case.
6.4.4.
6.4.3.4.
Current information is considered to be more susceptible to a
contravention from a competition law perspective as such
information can be used to determine the conduct of
participants in the market at the time of the exchange. In the
aforementioned scenario, it would be paramount that the
information exchanged is aggregated to such an extent that it
is virtually impossible to identify the owners of the particular
information.
6.4.3.5.
The exchange of future forecast information may be
acceptable provided that such information contains general
forecast information or information pertaining to general
market developments. The exchange of future forecast
information may require competition law scrutiny if such
information concerns detailed information in respect of
production and sales.46
6.4.3.6.
Current and future information may therefore assist firms in
reacting and adapting to changing conditions in the market
and the behaviour of their competitors.
Confidential Information or Public Information
Information shared between competitors that is in the public domain or is
easy to compile and assimilate may be more able to escape competition
law scrutiny than information which is confidential to a competitor and is
kept private from third parties.47 Accordingly, access to confidential
information of a competitor may serve to give firms an unfair advantage
over their counterparts that do not have access to the information.
6.4.5.
The substitutability of the goods produced by the various competitors in
the market
In order to determine whether the goods or services produced or
rendered by the firms that are parties to the information exchange are
substitutes, one would need to look at firstly, whether increasing a
demand for a particular good or service would result in a reduced
demand for another, or whether an increased demand for a good or
service will result in an increased demand in the other.48
6.4.6.
46 Op cit note 1 at 79
47 Op cit note 5 at 8
48 Loc cit
Accordingly, it is clear that while it may be beneficial to firms in an
industry to exchange statistical information of a general nature which
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14
assists such firms to create an overall picture of the level of demand or
output in it, or the average costs of each competitor, it does not follow
that they should be permitted to inform each other of matters such as
pricing policies or research and development projects which in the
normal course might be regarded as secret matters49.
6.5.
The ECJ and the ECC have consistently stressed the importance of competitors
acting independently. Information exchanges may exacerbate the problems of, and
increase the transparency on, oligopolistic markets where there is already limited
opportunity for competition. Particularly where sensitive market information is
exchanged, the exchange is likely to be condemned under Article 81(1) of the Treaty
of Rome. This is because the exchange of information may make it easier for
competitors to act in concert or to engage in tacit co-ordination.50
6.6.
Information exchange agreements may be anti-competitive if such arrangements
eliminate “the risks of competition and the hazards of competitors’ spontaneous
reactions by co-operation”. Exchanges of information, the object or effect of which is
to influence the conduct on the market of an actual or potential competitor, to
disclose to a competitor the course of conduct which the sender has decided to
adopt on a market or to render the market artificially transparent, will therefore be
unacceptable.51 In essence, it is clear that any type of information which has the
effect of eroding the vigour with which competitors compete in a market would
constitute an illegitimate and anti-competitive exchange.
Market Structure
6.7.
Generally speaking, the fewer the number of players in a market, the more a firm’s
decisions are affected by the decisions of its rivals and hence incumbents in
markets are more likely to take into account how their actions affect other firms and
how their actions affect it. As such, collusion (tacit or explicit) is more likely under
the market structure of oligopoly relative to the other market structures. Under the
market structure of a monopoly, the monopolist has no rivals to contend with and
thus is not influenced by or does not influence the decisions of rivals. In a perfectly
competitive market, there are a very large number of market participants who are
price takers where each firm faces a horizontal market demand curve.
6.8.
A competitive firm thus ignores the behaviour of its rivals because its profit
maximising decisions are based on the market price and not on the behaviour of its
rivals. However, since oligopolistic and monopolistic market structures are both
characterized, primarily, by a few number of market participants, incumbents pay
very close attention to rival firms’ behaviour. However, in respect of the former,
barriers to entry are considered to be high and prohibitive with very little new entry,
while for the latter, barriers to entry are significantly lower with free entry.52
6.9.
In general, any factor may help tacit collusion if it (i) facilitates a common
understanding on the terms of coordination, (ii) it helps the coordinating firms in
monitoring whether the terms of coordination are being followed and (ii) it improves
49 Op cit note 17 at 442
50 Op cit note 26 at 671
51 Loc cit
52 Op cit note 4 at 418
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the ability or reduces the cost of punishing a deviator53 54. One of the conditions for
successful tacit collusion is a credible and effective mechanism of retaliation that
would prevent any potential firm from deviating from the collusive path in favour of
short term profits from such deviation. That is, when firms expect that any attempt to
undercut the collusive price will be followed by tough (and costly) retaliation from
competitors, the likelihood of successful collusion is significantly high. However,
such retaliation only comes after the actual deviation has occurred. This means that
there is a time lag between the act of deviation, which generates immediate profits,
and the expected retaliation of the colluding firms, and a corresponding trade-off.
As such, successful collusion will depend on the firm’s relative importance of current
profits from deviation compared to future profits to be had from sticking to the
collusive path. If firms are impatient and value current profits over future profits, then
sustainable collusion is unlikely, and vice-versa.55
6.10.
Tacit collusion depends on, and thus varies according to, the structure of the
market, as highlighted above as well as the nature of competition in the relevant
market. In the section below, we consider the various factors and/or market
characteristics that may influence the ability to successfully collude tacitly.
6.11.
We set out below the relevant factors for sustaining tacit collusion:
6.11.1.
The Number of Competitors
6.11.1.1. Successful tacit collusion is more difficult, the larger the
number of competitors in the relevant market, as the ability to
tacitly ascertain a common understanding of the relevant
terms of coordination is severely undermined.
6.11.1.2. More importantly, however, as the number of competitors in
the market increases, each firm will receive a lower share of
the collusive profit, which increases a firm’s incentive to
deviate from the collusive path, as such a firm will be able to
easily steal significant market share away from all the other
firms by undercutting its counterparts in the short run. That is,
the lower expected collusive profit (as the result of many
colluding firms in the market) increases the value of current
profits relative to future collusive profits, which hinders
successful collusion.56
6.11.2.
The Significance of Market Shares
6.11.2.1. Symmetric market shares across players in a market
facilitates tacit collusion. This can be explained by the
converse as well as from 6.11.1 above.
6.11.2.2. If market shares are asymmetric, then the firms with the
smallest market shares have a greater incentive to deviate
53 Please note that these elements are necessary but not sufficient conditions for collusion.
54 Op cit note 5 at 23
55 Op cit note 2
56 Op cit note 2 at 12
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from the collusive path, as they would place more value on
current profits relative to long term collusive profits and/or any
loss that they may suffer by future retaliation.57
6.11.3.
Barriers to Entry into the Relevant Market
Collusion is very difficult to sustain if there are low barriers to entry, as
any attempt to maintain supra-competitive prices would trigger new
entry, which reduces the benefits of collusion as the number of
competitors increase.58
6.11.4.
Frequency of Interaction and Price Adjustments between Incumbents
6.11.4.1. The more frequent interaction and/or price adjustments are,
the easier it is to sustain collusion.
6.11.4.2. It is important to note, firstly, that firms cannot collude if they
do not interact repeatedly, as there would be no effective
retaliation that would prevent a firm from diverging from the
collusive path. Generally, the more infrequent the firms’
interactions, the longer time lag between deviation and
detection of deviation, which increases the amount of time
(and profitability) that a deviating firm is able to undercut the
collusive price, hence making ‘cheating’ more lucrative
relative to sticking to the collusive path.
6.11.4.3. A similar reasoning applies to the frequency of price
adjustments. When prices adjust more frequently, detection is
much more frequent and, hence, retaliation will be much
swifter.59
6.11.5.
Market Transparency
6.11.5.1. As alluded to above, frequent price adjustments facilitate
collusion by physically giving firms the opportunity to detect
deviations and exact punishment on the deviating firm. That
is, successful collusion can only take place if individual firms’
prices, for example, are readily observable and easily inferred
from market data. Conversely, the lack of transparency (of
sales and/or prices) makes it more difficult for successful
collusion.
6.11.5.2. With regard to transparency, and tacit collusion in general, it
must be stressed that it is not necessary to determine the
actual behaviour of the firms, but what information can be
inferred from available market data about other firms’
behaviour. For example, a firm can gauge from its own
57 Op cit note 2 at 14 - 16
58 Loc cit
59 Op cit note 2 at 19 - 20
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decreasing sales or market share that a firm is deviating from
the collusive path.60
6.11.6.
Growth of the Market
6.11.6.1. Sustainable collusion is likely to be maintained more easily
when the current short term gain from a deviation is small
relative to the cost of future retaliation, which implies that
collusion is easier to sustain in growing markets where
current profits are small compared with future profits.
6.11.6.2. Conversely, collusion is more difficult to sustain in declining
markets where future profits are declining and smaller than
current profits. 61
6.11.7.
Demand Fluctuations, Business Cycles and Seasonality
6.11.7.1. A market that is subject to demand fluctuations hinders
successful collusion. More specifically, when a particular
market is at its peak, the short term gain to be had from a
deviation (and hence incentive to deviate) is at its highest,
while the cost of retaliation is at its lowest, as retaliation will
occur at a time when the market is ‘declining’.
6.11.7.2. A similar argument applies to more deterministic fluctuations
in market demand, as in the case of seasonal or business
cycles.62
6.11.8.
Innovation
6.11.8.1. Collusion is less of a concern to competition authorities in
innovation driven markets, as collusion is more difficult to
sustain when the level and rate of innovation is high. The
reason is that innovation may allow one firm to gain a
significant advantage over its rivals, which would allow it to
steal significant market share away from its competitors.
6.11.8.2. As such, the other incumbent firms put less emphasis on the
cost of future retaliation and thus more tempted to cheat on
collusion.63
6.11.9.
Cost Asymmetries
6.11.9.1. Where firms in a market have different cost structures, they
may find it difficult to agree on a common pricing policy, as
firms with a lower marginal cost are likely to insist on lower
prices than those firms with higher cost structures are willing
60 Op cit note 2 at 22 - 26
61 Op cit note 2 at 26 - 28
62 Op cit note 2 at 29 - 32
63 Op cit note 2 at 32 - 35
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or able to sustain. As such, the differences in cost structures
make it difficult to reach consensus on the ‘focal price’, which
would negatively impact on the ability to successfully collude.
6.11.9.2. Another reason as to why cost asymmetries hinder successful
collusion is that low cost firms have less to fear in respect of
any possible retaliation from its high-cost rivals, which
therefore increases the low cost firms’ incentive to cheat. For
example, the ability of the high cost firm, especially if it is
inefficient, to compete with the low cost firm is limited and will
not be able to induce a significant profit loss (by retaliation)
without imposing an even larger burden on itself.64
6.11.10.
Capacity Asymmetries
6.11.10.1. If a market comprises firms that face the same capacity
constraints, increasing the capacity of one firm increases that
firm’s incentive to cheat and undercut its competitors, as the
retaliatory power of its competitors is limited.
6.11.10.2. As with asymmetries in cost structures above, asymmetries in
capacities favour the firm with higher capacity in that it has
more to gain from cheating and less to fear from retaliation.
By this reasoning, a market characterised by significant
asymmetries in capacity between the incumbents hinders
successful collusion.65
6.11.11.
Product Differentiation
6.11.11.1. Where a market is characterised by differentiated products in
an attempt to develop a ‘better product’, the resulting
asymmetry hinders successful collusion, as above. A firm that
has a better quality product is in a situation similar to that of a
firm that would offer the same quality product as the others,
but at a lower cost. Such a firm would have more to gain from
cheating on a collusive path and has less to fear from
possible retaliations from the other firms, as its ‘costs
structure’ is relatively lower and any retaliation by the ‘higher
cost’ rivals will not be able to induce a significant profit loss
without imposing an even larger burden on itself.
6.11.11.2. In addition to the above, product differentiation makes it
difficult to agree on the relevant terms of co-ordination, as the
differences in cost structures make it difficult to reach
consensus on the ‘focal price’.66
64 Op cit note 2 at 35 - 40
65 Op cit note 2 at 41 - 44
66 Op cit note 2 at 45 - 47
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6.11.12.
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Multi-market Contact
6.11.12.1. When competing firms are present in several markets in
addition to just one ‘focal’ market, it is easier for them to
sustain collusion across all markets and not just the ‘focal’
market. Multi-market contact increases the frequency of the
interaction between the competing firms, which increases the
ability of firms to detect deviation of any firm from the
collusive path.
6.11.12.2. In addition, multi-market contact also allows for a ‘softening’
of asymmetries that arise in individual markets, which will
facilitate collusion by restoring an overall symmetry that
facilitates collusion even when an individual market-level
analysis may suggest that collusion is difficult to sustain.67
6.12.
7.
It is clear that successful collusion depends to a large extent on the structure of the
market and the characteristics of that market. Accordingly, the type of market in
which information sharing is most likely to be problematic is an oligopolistic market.
Such a market is likely to facilitate successful collusion in the following
circumstances: where the market is characterised by a small number of players, the
more asymmetric the market shares of the competitors in that market, high barriers
to entry, the greater the frequency of interaction and price adjustments between the
firms in the market, the greater the degree of market transparency, the capacity of
the incumbent firms, the lower the degree of differentiation in the market and the
greater the multi-market contact of the firms.
Drawing the Line for Companies
7.1.
In light of the above, while it is impossible to provide an exhaustive list of the kinds
of information that may not be legitimately shared between competitors, we set
below a brief overview of the kinds of information that are likely to be considered by
the South African competition authorities as being anti-competitive. Accordingly,
firms need to be vigilant when exchanging the following kinds of information with
direct or potential competitors:68
7.1.1.
Supply or exchange that consists of prices /costs/ investments/ general
business strategy /rebates, discounts/invoices;
7.1.2.
Sales and production figures;
7.1.3.
Bidding and tender procedures;
7.1.4.
Customer information;
7.1.5.
Confidential information and business secrets;
7.1.6.
Current Information;
7.1.7.
Individual company data; and
67 Op cit note 2 at 48 - 49
68 Op cit note 11 at 438 - 439
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7.1.8.
Implied or explicit recommendations accompanying the exchange.
7.2.
Firms need to be especially vigilant when they operate in a concentrated market or
in an oligopolistic market structure where, inter alia, the following factors exist: the
product or service range between competitors is homogenous; where the barriers to
enter into the market are high; where the market is characterised by a greater
degree of transparency; where the competitors in such market have asymmetric
market shares; and where the information exchanges are frequent.
7.3.
The following kinds of information may be considered to be neutral, depending on
the frequency with which such information is exchanged, the structure of the
relevant market in which the competitors operate and the types of products and/or
services provided by such competitors:
7.3.1.
Exchange of information with non-competitors;
7.3.2.
Any exchange that consists of process type information;
7.3.3.
Public domain information;
7.3.4.
Historic information;
7.3.5.
Aggregated data;
7.3.6.
Commodity purchasing; and
7.3.7.
Where no further discussions
information exchanged.
of
information
accompanies the
7.4.
As stated above, one way to address the concerns raised regarding the sharing of
information between competitors about the improved ability to coordinate is to
aggregate (anonymise) the data. If this method is effective (i.e. individual operators
cannot be inferred), the ability to reach an agreement will usually be significantly
impaired. For example it will be much less clear how a fair division of profits can be
agreed if it is not known what the cost and demand situation in different localised
markets are.
7.5.
In terms of European competition law, information sharing arrangements attract
greater scrutiny if such arrangements are considered to be “identifying”
arrangements, such that the information exchanged allows competitors to assess
the strategies of their rivals by either revealing the owner of a particular set of data
or revealing the essence of particular transactions. Any potential anti-competitive
concerns of information sharing are likely to either be reduced or eliminated if the
information exchanged is sufficiently aggregated before such information is
disseminated to competitors. We aim to provide some guidance below regarding
the general criteria in determining the degree and level of aggregation required in
order to pass muster from a competition law perspective.
7.6.
The primary concern of information sharing arrangements from a competition
perspective is that such exchanges may serve to increase transparency on the
relevant market and therefore may have the effect of facilitating tacit collusion
between the competitors therein. If the data shared between competitors is not
sufficiently aggregated such that the owners of a particular set of data is revealed, a
competitor would be unable to thwart any collusive arrangement as such deception
would be able to be detected by the other participants.
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8.
21
7.7.
Competition law concerns arise when the information exchanged appears to be
aggregated but can be disaggregated69. Thus, information exchanges of identifying
information can result in retaliation by the other competitors against a competitor
who attempts to thwart a collusive arrangement. The fear of such retaliation
ensures that collusion is stabilised. Therefore, it is submitted that information
sharing between competitors in which identifying information is exchanged should
be treated as a contravention of competition law.70
7.8.
It is important to note that collusion can nevertheless still be facilitated through the
exchange of highly aggregated information where competitors have employed an
untargeted deterrent mechanism (i.e. a deterrent mechanism based on the rise or
fall of the aggregate price on a particular price threshold) or where the aggregated
information is still able to reveal the identity of a thwarting firm.
7.9.
In short, competition law concerns regarding the exchange of information between
competitors may be able to be allayed by a particular high level of aggregation
where in the first instance, the particular conditions of the relevant market are such
that targeted retaliation is the only deterrent that is able to sustain collusion and the
information shared is in no way identifying. The second instance is where the
conditions of the relevant market are such that a deterrent mechanism of an
untargeted nature is sufficient to sustain collusion, however, the information
exchanged is aggregated to a particularly high level such that an attempt by a
competitor to thwart the collusive arrangement would go undetected.71
7.10.
Finally, it is important that the highly aggregated information is placed in the public
domain such that all competitors and customers in the market can access such
information if they so choose. This will prevent certain firms from having an unfair
advantage over the other firms in the market.
7.11.
It is therefore clear that should firms find themselves in a situation where they are
exchanging information with competitors, legal advice should immediately be sought
in order to conduct an analysis of the relevant market and the types of information
that are exchanged.
Information Sharing Arrangements in the context of the proposed Complex
Monopoly provisions under the Competition Amendment Bill
8.1.
The Competition Amendment Bill B31D-2008 (the “Amendment Bill”) introduces a
new concept into South African competition law in the complex monopoly provision,
which thus far, has been the most polemic proposal.
69 It may be possible to disaggregate information when the information exchanged is categorised according to narrow
sub-categories with few contributors. It may still be possible to disaggregate the information with more than a few
contributors if such data can be complemented by additional sources, that is, information that is in the public domain. In
the aforementioned instance, complementary and overlapping information which is publicly available may allow for a
regression analysis in order to distil information particular to certain competitors. See K Kühn and X Vives ‘Information
Exchanges Among Firms and their Impact on Competition’ (rev.ed. 1995) Office for Official Publications of the EC 152
70 The same analysis should be applied to information sharing in which the exchanged information can be
disaggregated to reveal information of an identifying nature. See K Kühn and X Vives ‘Information Exchanges Among
Firms and their Impact on Competition’ (rev.ed. 1995) Office for Official Publications of the EC 152; S Motta Competition
Policy: Theory and Practice (2004) 167-177
71 Florian Wagner-von Papp ‘”Who Is’t That Can Inform Me?” – The Exchange of Identifying and Non-Identifying
Information’ E.C.L.R. 2007, 28(4), 264 - 270
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8.2.
22
In terms of the complex monopoly provisions, a complex monopoly subsists within a
market if :
8.2.1.
At least 75% of the goods or services in that market are supplied to, or
by, five or fewer firms;
8.2.2.
Any two or more firms conduct their affairs in a “conscious parallel” or
co-ordinated manner; and
8.2.3.
The conduct has the effect of a substantial prevention or lessening of
competition,
unless there are technological, efficiency or other pro-competitive gains.
8.3.
“Conscious parallel conduct” occurs when “two or more firms in a concentrated
market, being aware of each other’s action, conduct their business affairs in a cooperative manner without discussion or agreement”72.
8.4.
The complex monopolies section of the Amendment Bill is aimed at preventing what
the DTI refers to as “uncompetitive outcomes”. In this regard, the DTI is of the view
that certain markets exhibit particular characteristics or market structures that render
them uncompetitive / anti-competitive, even where there is no explicit or implicit
contravention of the Competition Act. The complex monopolies section of the
Amendment Bill is intended to empower the Commission with the necessary
authority to address these characteristics or market structures.
8.5.
Currently, our Competition Act prohibits “An agreement between, or concerted
practice by, firms, or a decision by an association of firms…if it is between parties in
a horizontal relationship...” The concept of a “concerted practice” allows the
competition authorities to persecute conduct even when there is no formal
agreement between competitors, but an indication of a consensus in the course of
action pursued; a “meeting of the minds”.
8.6.
By prohibiting “conscious parallel conduct”, the complex monopoly provisions go a
step further than the current provisions of the Competition Act by prohibiting even
commercially rational interdependence between competitors.
8.7.
The implications of the proposed complex monopoly provisions for information
exchanges between competitors is far from clear. The problem with the proposed
provision is that it does not provide clearly discernable guidance as to what is and is
not permissible for firms to do. It would seem that information arrangements would
still fall to be analysed under the same provisions of our Competition Act and
therefore our analysis of the types of information exchanges that would be likely to
be seen as anti-competitive would still apply under the Amendment Bill. However,
information exchanges, whether legitimate or anti-competitive, may still serve to
create a certain interdependence between firms in that access to information may
result in firms, acting independently of each other, appreciating market conditions in
the same way. Co-ordination by firms, even if such co-ordination is co-incidental
72 In terms of the proposed complex monopoly provisions, the Commission may institute an investigation into the
market, following which the Commission may apply to the Tribunal for a declaratory order requiring or prohibiting conduct
or setting conditions to mitigate the effect of the complex monopoly on the market. Pre-conditions for the application for
such an order include the following: at least one of the firms must have at least 20% of the market and be engaged in
complex monopoly conduct; and the conduct must have resulted in - high entry barriers; exclusion of other firms;
excessive pricing; refusal to supply; or other market characteristics that indicate co-coordinated conduct.
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23
with no consensus between them, would be prohibited under the proposed
provision.
9.
8.8.
Accordingly, even those information exchanges which may serve to have procompetitive benefits in the market may lead to firms acting in the same manner and,
provided that the various elements as set out in terms of the proposed provision are
satisfied, the mere fact that the firms are acting in the same way may result in a
contravention of the Amendment Bill.
8.9.
Should the Amendment Bill be passed, we consider that firms who are particularly
concerned about their conduct should seek competition law advice in order to
conduct an assessment of the market in which they are active and to devise a
tailored model for such firms to follow when making their commercial decisions and
in interacting with competitors.
Conclusion
9.1.
In light of the above, while there is a paucity of precedent in respect of information
sharing arrangements from a South African competition law perspective, it is likely
that our competition authorities will have regard to the foreign jurisprudence dealing
with the matter as set out above.
9.2.
That information exchanges may lead to pro-competitive benefits in the markets
concerned is clear. However, such exchanges may not only also serve to facilitate
collusion and collusive practices between competitors but may also have the effect
of diminishing the vigour with which competitors compete in the relevant market.
9.3.
It is clear that, in order to determine whether an exchange is legitimate, one needs
to have regard to the type and characteristics of the information exchanged together
with the structure of the market in which the firms operate. Accordingly, it is
impossible to provide an exhaustive list of the kinds of information that may and may
not legitimately be exchanged between competitors as a legal analysis would need
to be conducted into the markets in which the firms operate together with a full
assessment of the type of information that is shared.
9.4.
Finally, information exchanges between competitors may increase the chances of a
contravention under competition law in terms of the proposed Amendment Bill
insofar as firms make use of such information to act in the same manner.